Nvidia Can Sell H20 Chips to China, but with a Catch
Nvidia and AMD were given a choice to pay 100% in tariffs on their chips or cut the U.S. government in on sales to China.
Quick overview
- The U.S. government has permitted Nvidia to sell its H20 chip to China, lifting previous sales restrictions and fines.
- Nvidia and AMD will pay a 15% revenue cut to the U.S. government for their sales in China.
- Following the announcement, Nvidia's stock initially dipped but recovered, while AMD's stock saw a slight increase.
- The agreement opens up a lucrative market for both companies in China's growing tech sector, despite potential competition from local firms.
The U.S, government has allowed Nvidia (NVDA) to sell its high end H20 chip to China after years of blocking these sales with stiff fines, but now the U.S. wants a cut.
Nvidia will be allowed to sell its powerful H20 AI processing chips to Chinese customers and not have to pay the high fees that the U.S. was previously requiring, but they will have to pay the United States government a 15% cut of their revenues for all Chinese sales.
The government will also be taking a similar cut from Advanced Micro Devices (AMD) and their MI308 chip for all China sales. This follows a statement from President Donald Trump that he would be enacting a 100% tariff on any chips and semiconductors shipped to China from the United States. His ultimatum is that those companies would have to be building in the United States if they wanted to avoid this incredibly high tax.
How the Deal Affected AMD and Nvidia Stock
Nvidia’s stock briefly dipped on Monday in premarket trading as a result of the announcement, but then it regained its footing and climbed back to where it was previously at $182 per share.
AMD likewise saw a small dip after the announcement, but as the market fully opened on Monday, AMD stock climbed 1.82%. Investors seem happy and enthused about the agreement and its prospect for opening up trade with China.
If these two companies can freely sell their most expensive and powerful chips to China, that opens up an entirely new market for them. China has a quickly growing tech market that is seeing widespread adoption of AI integration. AMD and Nvidia are meeting a vital need there and should profit tremendously as a result.
While that are potential competitors for these companies that are coming out of China, nothing definitive has emerged from Huawei and other companies that have talked about offering their alternatives to the H20 chip. For now, AMD and Nvidia can have their run of the market and even with the U.S. government’s cut, they should enjoy significant profits.
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